#InvestorSpotlight: Keith Makse, BlueOceanGroup

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Podcast Transcription

Dave Dubeau [00:00:09] Everyone, this Dave Dubeau here with another episode of the property Profits Real Estate podcast today we’re doing in investor spotlight with Mr. Keith Makse, who is a real estate entrepreneur from Kitchener, Ontario. Keith, how are you doing today?

Keith Makse [00:00:23] Oh, I’m great, Dave. Thanks for having me here. I really appreciate it.

Dave Dubeau [00:00:26] Well, I’m glad to have you on the call. So, Keith. Let’s start at the beginning. How long have you been doing this fun, weird thing called real estate investing?

Keith Makse [00:00:37] So I’ll block this to the financial impact that we had here in Canada in 2008. There was 2008. All this fun stuff was going on in the US while I had a business, and in 2010 I was actually folding and I’ve been developing video games for 20 years. And at that time, I had my own studio and I was holding a contract with the US based publisher at the time. Unfortunately, they got hit by the financial impacts I did, too. So in at the end of 2010, I went from a thriving videogame business to having to close my doors. All my eggs were in that one basket and I was moving out of province to go work for another company. And that’s when I realized that, you know, if I actually own my own home and have somebody rent it and pay the mortgage down, I’m going to be much better off in the future. So I would say in 2011, I was able to get my first tenant in shortly after I left out of the province and fortunate.

Dave Dubeau [00:01:38] But that was the home you already had, correct?

Keith Makse [00:01:40] Yeah, that’s right. Yeah, yeah. And then, you know, life got really busy young family and so on. And then I would say I got back into it in 2018. So since then, I’ve purchased a number of properties. I’ve been running some short term rental units and just having fun.

Dave Dubeau [00:02:00] Well, that sounds great. So I imagine you saw a nice little uptick in the fact that you held onto that property instead of selling it off when you had to move out in the first place. I imagine you’re pretty happy you made that decision

Keith Makse [00:02:12] Oh my goodness. I mean, I’ve been holding it for like, I bought it in 1999 and just already I saw how much it appreciated in that time. Well, now it’s more than tripled in value since that point, so I’m super happy with where it is.

Dave Dubeau [00:02:28] So besides that, what you know, what do you see as the four keys? What is the big appeal to real estate as an investment class?

Keith Makse [00:02:38] Well, I think with real estate, it’s the fact that you have so many profit centers, you have your mortgage pay down and you have your appreciation and cash flow. And to me, one of the things that there’s not enough of, there’s a lot of real estate opportunities where people are like, Oh, you know, I’m getting $100 or $200 or $500 the door you can. And five hundred is a big number for some, some investors. And I’m thinking that’s nowhere near good enough for me. I need to go much higher with that. So I think all of those are great. But the cash flow, that’s something that has an immediate impact, and the more I can get now is less. I’ll have to go for the future and more I can do with and reinvest all of that. So that’s why I like I’ve been investing in a different real estate strategy than most other people are.

Dave Dubeau [00:03:28] Yeah, because these days, especially with the price of properties, you’re in Ontario, I’m in B.C. I mean, it’s local crazy all across the board these days. So what are you doing in order to maximize cash flow, seeing that, you know, typically, unless you bought the property back in 1999, it’s tough to get a single family home, especially that’s going to cash flow these days? But what unique way have you found to make that happen?

Keith Makse [00:03:56] Yeah. So I think there was a rise in popularity a couple of years ago with Airbnb and doing short term rentals and obviously COVID hit we we’ve had a number of people who had to shut their doors overnight, like people were doing what was called Airbnb arbitrage, where they would rent a space, fill it up with furniture and then rent it on to Airbnb and stuff

Dave Dubeau [00:04:19] like subletting type thing.

Keith Makse [00:04:20] That’s exactly. And they would profit the difference between all their expenses and the revenue that they had coming in. So it was a great way to make money, and some of these people were making $1000 a unit, $2000, and I thought, Well, where’s the difference? Like, I actually have a property. I was converting to potentially a long term rental, and I had already done a lot of investigation and research into short term renting. So I decided, you know what? I’m going to take this one property here. I’m going to try it as a short term rental. I have no idea what I’m doing, but I’m going to give up my best shot, worst case scenario. I can turn it back into a long term rental.

Dave Dubeau [00:04:57] Exactly.

Keith Makse [00:04:58] Long story short, I launch it one week before the lockdown I was in Montreal. I’m recognizing, Oh my goodness, everything’s shutting down slowly right now. People are starting to wear masks before masks were required, people were staring at each other like, Don’t you dare come near me? And I recognize like, this is going to be a real challenge. Now Airbnb had actually, prior to me, launching, shutting down almost all of the listings around. And so I came in right at the perfect time I got right in under the radar right after they lifted this ban. And in Ontario, we were allowed to still run short term rentals provided that people needed a home. And so there were some restrictions looking at restrictions. I was totally within the ability of running it when I was actually providing homes for people who didn’t have one. For instance, my very first guest worker stayed for three weeks and then they were waiting to go back to China because all the flights were canceled at the time. So they’re waiting to get a seat on a plane. And then the next guests that I had stayed with me for five months, they moved from the Philippines. They were waiting for their house to be built in Waterloo, just next to next door to Kitchener, and they had nowhere else to live. So it’s like, Well, I’ll cut you a great deal if you come and stay with me and we, you know, it was a Win-Win situation for sure. They were paying down my mortgage. I was able to give them a place to live, and I weathered out that entire storm. So I was very lucky, very fortunate, and I recognize that. But in that time, I realized just how much I started making more and more money on this idea of short term rentals. And so I really dug deep, took a lot of education, learned from a lot of different resources. I actually paid for a coach and now I’m actually grossing on that property. It’s so it’s a three bedroom home, two bathroom, and I’m netting after all the expenses, about $2500 a month.

Dave Dubeau [00:07:01] Wow, that’s outstanding. Because that’s how much would you be netting on that same home as a regular rental?

Keith Makse [00:07:10] I would probably be charging 2500 and I would be at. So I like I’d maybe make 100 bucks if I was lucky, like a couple of hundred bucks.

Dave Dubeau [00:07:19] That’s a huge difference. All right. So what? It sounds like it’s all upside. What are some of the downsides to short term rentals in your experience?

Keith Makse [00:07:29] The most important part is that it’s a very active business, unlike long term renting, where, you know, once you actually go through the challenge of getting the right tenant and placing them, giving them up and running. And then, you know, after a few months, it’s stabilized and all you’re doing is collecting that rent check, making sure that the property maintenance is taken care of and. All that good stuff. The problem that I have is I’m constantly placing a new guest. They’re always wondering where things are. And even though I have a lot of automated systems, there’s still a lot of communication that goes on. I’m also always looking for that five star review. If I don’t have a five, if I don’t have a series of five star reviews, it’s going to affect my ability to actually market on Airbnb and other platforms where it’s like, Oh, your place is a little bit dirty. Yeah, we won’t put you at the top the list anymore. So not a

Dave Dubeau [00:08:21] whole lot more persnickety in this business, that’s for sure.

Keith Makse [00:08:25] Oh yeah. And you know, it’s not just being a landlord anymore, it’s now hospitality. So I had some hospitality experience. You know, in another, it seems like another lifetime ago. But yeah, it really does make that difference. Having that hospitality background to knowing that, you know, you can’t please everybody, but you can really do a lot to please a lot of people and just making sure that you do whatever you can in order to get those five star ratings as well as, you know, having if I have to give somebody even a bit of a refund, which I have done a couple of times just to make sure that, you know, they’re happy, they recognize that they had a problem. I listen to them and I was able to respond to that. That’s great. So I’m not trying to make sure I’m getting every single dollar and, you know, kind of working

Dave Dubeau [00:09:14] on them on and it’s not a churn and burn kind of business.

Keith Makse [00:09:18] No, definitely not. And it couldn’t be because it’s self-regulated through the review system. So I really have to maintain that.

Dave Dubeau [00:09:25] No, that makes a lot of sense. So you have a couple of properties that you’re doing as a short term rentals at the moment or just the one or what do you have going right now?

Keith Makse [00:09:34] Well, actually, we have six right now. Yeah. So we have one in Kitchener. We have four in Waterloo and one in Orange Fell Ontario, just north of Toronto. So that one in Toronto was really kind of an experiment. It’s a really cute, unique space. It’s a tiny house and we run it completely remotely. We don’t very much like real estate. If you have the right systems in place, you don’t actually have to be there to manage these properties at all. So we’ve been managing that one thing since about June. So, you know, a few months now for four months or so and it’s been going really well. It’s been getting more and more popular every single month. So we’ll see

Dave Dubeau [00:10:19] more of, you know, those tiny homes or big hit these

Keith Makse [00:10:22] days, that’s for sure. Yeah. And now their city is actually looking into it and outside of Toronto are all talking about tiny home communities. So it’s very much hitting a sort of a niche spot at the moment. However, like one of the things that we’re also working on is moving outside of Canada, where like we’re looking at expanding across Canada into a few different cities that we’re currently focused on. We’re also looking at some cities in the U.S. and even down into the Caribbean. So we have boots on the ground right now today talking to us about some properties in Anguilla that we’re looking at.

Dave Dubeau [00:10:56] Very cool. So Keith, you’ve been around real estate for quite some time now. You’ve got a background in technology. You’re obviously, obviously a very sharp guy. You’ve got a hospitality background as well, which lends itself beautifully to short term rentals. What would you say is, is your unique ability or your unfair advantage when it comes to real estate investing?

Keith Makse [00:11:20] Yeah, I think it’s the fact that with the technology that I worked with, particularly with mobile games where it’s really trying to dig down and find out exactly what that end users looking for. And in my case, now it’s what the guest is looking for and bringing in the marketing. And I have all kinds of other digital tools to provide me feedback and more information on both the guest and the stand, how my property is doing compared to other properties and where I always managing, and it’s just trying to maintain that top level service. So I think my background really lends itself perfectly into to that short term rental strategy. It’s not for everyone. I mean, I actually stand at a place this summer where the host was. Pretty rude, but it was great because nobody like staying there and he couldn’t you couldn’t raise its prices very high, so I got to say it a great place for, you know, along

Dave Dubeau [00:12:20] with a grumpy guy for a couple of days but got a good deal.

Keith Makse [00:12:23] And the best part was I never even had to meet the guy. So, you know, you can do these contactless check ins. It’s just a great system to do that. So I utilize all that technology, my knowledge of the hospitality industry and being able to provide great service and really get a lot of great information that really feeds back into how we grow and expand our business and in our real estate strategy. Wonderful.

Dave Dubeau [00:12:49] That’s wonderful. So in general, over all the years that you’ve been involved in revenue, real estate deals, what would you what would you say has been the biggest lesson you’ve learned so far from real estate?

Keith Makse [00:13:02] I would say two major lessons that I’ve learned. Number one, taking action, you can research all you want. You can educate yourself as much as you want without taking action. It’s just entertainment. It’s another form. I know many people who do that, and I feel very privileged that I have taken action and it’s been a very it made an impact on my life. And I also think that it’s creativity and looking at, you know, you can look at all the problems that are out there. But to me, problems are just solutions that haven’t been found yet. So looking for how do I get around this hurdle or bypass this issue or this problem? You know, maybe a bank doesn’t like the fact that I’m dealing with short term rentals. OK, well, how do I work with them? How do I? How do I work around that? How do I get these things done? There’s always a way, and it just requires a lot of creativity and a lot of conversations. And I’m happy to do that in order to make sure that at the end of the day, like this is my future, my investment, I’m going to take care of it and hopefully I can help a few other people along the way to make sense.

Dave Dubeau [00:14:11] Now one last question before we wrap up. Do you personally think that real estate investing is for everyone?

Keith Makse [00:14:20] I would say no.

Dave Dubeau [00:14:21] Mm-Hmm. Why not?

Keith Makse [00:14:23] Yeah. The biggest challenge with real estate investing is that it does require that knowledge. I think anybody who can do it should. But I don’t think everybody is going to be capable of taking the time to learn, to do what’s necessary to network with the right people. I’m not saying it’s like a very, you know, niche group or anything, but, you know, putting up with the headaches of people who are renting and obviously not everybody can get into real estate. We need to rent out to people who aren’t. So those are also good, good reasons. Then again, some of those might also be landlords. You never know. Right?

Dave Dubeau [00:15:02] So basically, I would agree with you. It’s not necessarily. I think everyone can benefit from real estate. Not everyone necessarily is geared up for being an active real estate investor themselves. Would that be fair?

Keith Makse [00:15:17] Oh, absolutely. And some like what I’m doing is more active than others, but still even having a property. I mean, my first property, I moved out of province and I was running it. I had to learn all about creating a power team and how to run all of my systems when I didn’t have any at all. Trial by fire and fortunately, I came out with a positive experience

Dave Dubeau [00:15:38] with a tan and not a burn.

Keith Makse [00:15:40] Exactly, yeah.

Dave Dubeau [00:15:42] So people want to connect with you and find out more. What should they do?

Keith Makse [00:15:46] Yeah, they can connect with me. I’m on Facebook. My name keeps Maxey. Also on Instagram Keith Dot Maxey and through Blue Ocean Property Group, our website for investors who are interested in having us manage properties for them through short term renting and getting the benefits of all that cash flow, they can find us at Blue Ocean Prop Group dot com

Dave Dubeau [00:16:09] Very good, Keith has been a lot of fun. Thanks for sharing some of your wisdom.

Keith Makse [00:16:12] Yeah, thank you very much, Dave. I really appreciate that.

Dave Dubeau [00:16:15] All right. Take care. We’ll see you on the next episode. Well, hey there. Thanks for tuning into the property Profits podcast if you like this episode. That’s great. Please go ahead and subscribe on iTunes. Give us a good review. That’d be awesome. I appreciate that. And if you’re looking to attract investors and raise capital for your deals, that may invite you to get a complimentary copy of my newest book Right Back There. There it is the money partner formula. You’ve got a PDF version, an investor attraction book dot com again investor attraction, book dot com. Take care.

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